Only 40% of pre-retirees—those between five and 10 years away from their desired retirement age—say they are financially preparing for retirement. This according to New York Life’s latest Wealth Watch survey, released Sept. 17, which found that American adults overwhelmingly report they are not financially preparing for major life events like purchasing a home, starting a family, changing careers, or retirement.
The survey also found half of pre-retirees think they will retire later than expected, and 22% think they may never be able to retire. Generation X pre-retirees report doubts as they approach their retirement years, with only a quarter believing they will retire on time.
“No two journeys through life are the same. But one thing is certain: we all experience major life events, both planned and unplanned, and those events come with financial impacts,” said Jessica Ruggles, corporate vice president of Financial Wellness at New York Life. “Preparedness is key. Our data shows that working with a financial professional helps people feel more prepared and can lead to better financial outcomes,” adding that 53% of people who work with a financial professional felt financially prepared for their major life events, versus 33% of those who don’t.
Thirty-one percent of people who work with financial professionals report facing no challenges when preparing for their life events, versus only 17% of people who don’t.
“Navigating competing priorities and tradeoffs, along with increased longevity, creates a dynamic environment. However, financial emergencies are frequent, leaving many Americans vulnerable to life’s unexpected events,” Ruggles said.
Financial preparedness and sources of support by generation:
- Younger generations are more likely to say they recognized that they needed financial help and sought it out while experiencing life events (Gen Zers: 31%, Millennials: 32%, Gen Xers: 20%, Baby Boomers: 17%).
- Millennials are the most likely to say that they felt very prepared to financially handle their life events, while Gen Xers felt the least prepared (Gen Z: 27%, Millennials: 34%, Gen X: 20%, Boomers: 27%).
- The top sources where adults report getting help to manage their finances while navigating a life event are friends and family (62%), financial professionals (32%), and internet searches (26%).
- After friends and family, which all generations reported as their top source for support, Gen Zers were most likely to use social media for guidance (32%), Millennials (39%) and Gen Xers (24%) preferred internet searches, and Boomers (49%) were most likely to turn to financial professionals.
- According to the New York Life Foundation’s 2024 State of Grief Report, 63% of respondents report having time off specifically for bereavement, but less than half (47%) report that this time off was paid. This highlights an opportunity for employers to bolster their resources for bereavement support.
“We tend to overestimate our chances of positive experiences and underestimate our chances of negative ones, leading to a disconnect between our financial expectations and realities. While we plan for things to go the expected way, unexpected events are common,” Ruggles said.
“The typical retirement preparation often happens too late and is individualistic in approach, meaning planning and decision-making are thrust upon the individual, rather than an employer or financial professional providing support early and often.”
New York Life’s Jessica Ruggles
For example, falling ill may happen suddenly, but someone age 65 or older has an almost 70% chance of needing long-term care, according to 2020 figures from the Administration for Community Living.
“The typical retirement preparation often happens too late and is individualistic in approach, meaning planning and decision-making are thrust upon the individual, rather than an employer or financial professional providing support early and often,” she added. “This points to the importance of having a relationship with a financial professional who can help set realistic expectations as well as create long-term financial strategies that include sufficient emergency savings, investments designed for longer durations, income protection solutions, and opportunities to fund things we enjoy doing.”
The importance of personalized, professional guidance becomes even clearer as more people turn to social media and online searches, she said, which broadens access to financial education, but also leaves people at risk of receiving inaccurate advice.
Concern over delaying retirement
The Wealth Watch survey found Americans nearing retirement are concerned they will have to delay retirement, and want more information to help them prepare.
- 82% of pre-retirees say they are facing challenges preparing for retirement such as saving enough money (56%), managing debt (31%), and rising healthcare costs (29%). 37% of pre-retirees have retirement savings and only 22% have a retirement strategy.
- 71% of adults are looking for further guidance or advice to feel prepared for retirement—with Social Security (38%), preparing for healthcare costs (30%), and product knowledge (e.g., annuities, long-term care insurance) (24%) being the top areas of focus.
- Adults approaching retirement who work with a financial professional are more likely to say that they know how much money they need to save to be comfortable in retirement compared to those who do not (76% vs. 55%).
- 63% of pre-retirees don’t think their 401(k) and Social Security will be enough to support them in retirement.
- While 61% of retirees saved more or about the same as they thought they would before retiring (more: 13%, about the same: 48%), 39% of retirees saved less than they thought they would.
- Retirees are less likely to say that they have financial security during retirement compared to pre-retirees’ expectations (24% vs. 30%).
Most of Gen X unlikely to retire on time
Rising longevity and declining financial confidence of Gen Xers result in plans to retire later or not at all. However, across all income levels, 18% of the Gen X cohort report having successfully retired.
“The potential for people to live longer has implications for the workplace, retirement, and health planning. Gen Xers, the oldest of whom are now eligible to take retirement withdrawals, are in a more financially precarious position compared to other segments, likely due to sacrifices to their own financial security to provide care, which strains all areas of wellbeing,” said Ruggles.
- 70% of Gen X pre-retirees think they will retire later than expected or not at all. Only a quarter of Gen X pre-retirees believe they will retire on time.
- Despite approaching retirement age, only 46% of Gen Xers are actively planning for retirement. Among those actively preparing, growing their retirement savings accounts (48%), reducing debt (47%), and contributing to their investment accounts (37%) are their top financial priorities.
- 73% of Gen Xers who work with a financial professional are confident that they will save enough to live comfortably in retirement, compared to 45% who don’t.
- Gen X pre-retirees working with a financial professional are more likely to say that they know how much money they need to save to be comfortable in retirement, compared to those who don’t (71% vs. 50%).
“Our data shows that there are pathways for building retirement confidence. Among adults in this generation who are retired, two-thirds reported saving the amount that they wanted or more before retiring because they had a financial strategy. Access to human advice and personalized guidance remains paramount in helping individuals prepare for a more secure retirement without fear of outliving their assets.”
SEE ALSO:
• Top Financial Fears Impacting the Middle Class
• Gen Xers Doubt Their Ability to Retire Securely
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
